A political trap has been added to the geological, technical and environmental obstacle course faced by Canadian natural gas suppliers. A sore spot in industry relations with native communities is worsening to the point where the Canadian Energy Pipeline Association (CEPA) has warned that “a point of crisis” is at hand.

CEPA chairman Richard Bird urged the federal and provincial governments to accept and act on responsibilities that constitutional rulings by Canadian law courts have recently given them to consult First Nations on industrial projects. Bird, describing the industry as “a motivated and eager bystander,” warned that it has been left with “the monkey on its back” by government inaction. “We’re kind of caught in the middle.”

The new wrinkle compounds complications already slowing down Canadian projects that stray on or near aboriginal territory, which includes an increasing proportion of drilling and pipeline developments, as the industry ventures farther out on its frontiers to replenish supplies.

Regulatory problems, chiefly on the environmental front, were blamed for a delay to the C$1.1 billion (US$700 million) Deep Panuke project offshore of Nova Scotia. EnCana Corp. said it will not be able to hit its target of 2005 for starting production of 400 MMcf/d, but will use the time for further drilling to expand its offshore gas reserves (see related story).

The delay was expected to spread to the transportation project intended to handle the Deep Panuke gas, a C$190.8 million (US$123 million) expansion by Maritimes & Northeast Pipeline. The added disruptive potential of the new aboriginal rights confusion was highlighted by a close call for a C$270 million (US$170 million), 10% capacity expansion on the Westcoast natural gas pipeline in British Columbia to 2.1 Bcf/d, primarily for exports to the United States.

Only an 11th-hour agreement to try for a peaceful settlement by December saved the project and its sponsor, Duke Energy Gas Transmission Canada, from a prolonged legal battle. The National Energy Board cancelled a special hearing it had scheduled for Nov. 6 in Vancouver after the truce papered over a dispute that was escalating into a major aboriginal rights case heading for the high courts.

The dispute grew into an official constitutional contest that drew in the federal justice department, which served notice that it was prepared to intervene in subsequent appeals to the courts. The affair erupted when the Cariboo Tribal Council, representing four Northern Secwepemc or North Shuswap communities in the Williams Lake area of northern B.C., formally demanded federal action to uphold rights established by late-1990s court cases. The legal rulings declared that aboriginal groups have rights to be consulted on industrial projects, and that the federal government has a “fiduciary” or trust duty to ensure adequate consultation happens.

In the absence of help assessing the project’s effects on native land use, lifestyles and territorial claims from any other federal agency, the Northern Shuswap appealed to the NEB to do the job. The NEB has repeatedly rejected such appeals from natives, refusing to be forced into serving as an advocate for particular groups’ interests, rather than continue to play an impartial role as a quasi-judicial or court-like regulatory agency. Among issues that the NEB wanted the aborted Vancouver hearing to settle was a critical question of whether the entire BC pipeline project had to be held up until the aboriginal rights claims were settled, potentially by eventual appeals to the courts.

Although only the Northern Shuswap took formal legal action, the Duke-Westcoast case made it plain that their cause was popular in aboriginal communities. Cheam Nation Chief June Quipp vented frustrations over the lack of an expert government advocate to look out for native communities’ interests when industrial projects affect their regions. “We do not have the financial or human capacity to make informed decisions,” Quipp told the NEB. The chief said forcing often small, financially-strapped native communities to cope on their own with big business interests and lawyers amounts to “systemic racial oppression.”

CEPA, which represents all of Canada’s principal pipelines, warned a fall conference of the federal and provincial energy ministers that it could see no end to the prospect of aboriginal frustration with government inaction, causing long delays to industrial projects. A written submission to the policy meeting in Winnipeg said, “In many cases CEPA members and our proposed projects have been selectively used as political leverage by aboriginal people in their struggle with the Crown . . . this is a trend that we see continuing in the future. This situation places our industry in a very difficult position as we have no ability to address the matter of aboriginal and treaty rights.”

CEPA said the outlook worsened since a spring “memorandum of guidance” by the NEB. The guideline said the energy board could not become a native rights advocate, and relied on project sponsors to prove that other government agencies fulfilled the duties to First Nations laid down by the courts. CEPA said, “The business uncertainty created by the memorandum will severely erode Canada’s competitive position in the energy industry and challenge our confidence to put investor funds at risk.”

CEPA said it “does not believe private investors are capable of, nor responsible for, addressing the constitutional issues between the Crown and aboriginal peoples . . . Canada must develop policy, frameworks and processes to ensure that timely and meaningful Crown consultation takes place in order to fulfill its fiduciary duty related to resource development projects.” The governments have yet to respond publicly. Privately, federal officials predict it will take some time for the industrial consultation role to be worked out by departments and agencies already swamped with other native issues while forced to operate with limited staff and budgets.

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